Liberian Businessmen Arrested for Price Gouging

Sometimes, there are perfectly good reasons for prices to rise rapidly. The price of tomatoes in North America shot up in the winter because of Florida hurricanes and California floods, and it eased when the winter harvest came in. Oil prices have gone through the roof because of Chinese demand for oil, a cold winter in the Northern hemisphere and lousy planning for the reconstruction of Iraq. But, there are also times when prices rise because of cheating by market participants. And today, 30 businessmen in Liberia are under arrest for creating an artificial shortage of rice and gouging the consumer.

Rice is Liberia's main staple. When rice gets expensive, Liberian governments get wobbly. The price soared in 1979, and the situation resulted in a coup by Samuel Doe in 1980. Liberia doesn't need any further challenges right now. It's coming off a 14-year civil war, which ended with 500,000, and 3 million Liberians are "suffering acute hardship" according to BBC correspondent Jonathan Paye-Layleh. Translated, that means not enough to eat, not enough work, and/or some shortage of life's basic necessities. A recent CIA estimate published in the agency's World Factbook puts per capita GDP at around US$1,000 a year.

So, when rice prices went from 1,320 Liberian dollars for a 50-kilo bag (about US$24 for 110 pounds) to 2,475 Liberian dollars for the same 50-kilo bag, the average Liberian took a 2.1% drop in disposable income per bag consumed. That bag has enough calorific nutrition to make about 90 meals of 2,000 calories (which many Liberians can't get regularly). Even for a family of four (and Liberians tend to live in much larger groups), that means about a bag every month or so. And that is a rice only diet -- vegetables and meat will help stretch that rice out, but they are more expensive themselves.

If these 30 businessmen are, indeed, guilty of hoarding the rice to create a stockpile for themselves and a shortage for consumers, then the nation's interim leader, Gyude Bryant, had it about right when he said, "We consider their behavior economic sabotage." Whether they will get a fair trial is a different story, but one hopes that Liberia's history enters the situation. Founded by freed American slaves, the nation has historically emulated many of America's better features -- a fair trial being one of them. At the same time, in the aftermath of a civil war, legal niceties like fairness are often sacrificed in Liberia and elsewhere. Still, if guilty, they threatened the nation's fragile peace.

It is for this reason that governments must keep an eye on businessmen. These fellows, if they are guilty, were following their own self-interest by getting as much as they could for their rice. But by doing so in the manner they chose, they threatened social instability, and it takes no leap of the imagination to see that a renewed civil war could come of it. Adam Smith warned, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the pubic, or in some contrivance to raise prices." The emphasis has been added, but one suspects redundantly so.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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